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Global Management Forum 2019

Montblanc lures new Asian customers with digital luxury

CEO Baretzki says growth in mainland China has offset Hong Kong losses

Montblanc International CEO Nicolas Baretzki tells the Nikkei Asian Review about his digital strategy. (Photo by Manami Yamada)

TOKYO -- For Nicolas Baretzki, chief executive of Montblanc International, one particular collector of the company's products illustrates the enduring appeal of luxury goods. Each time the collector purchases a Montblanc pen -- even a hard-to-find limited edition -- he buys two to pass down to his twin children.

"Our customers are not buying products for now, but for the next generation," Baretzki said in an interview during this week's Nikkei Global Management Forum in Tokyo, where he presented the storied brand's strategy for disrupting the luxury market.

The concept of disrupting industries is normally associated with startups, not legacy brands like Montblanc and its parent, Switzerland's Richemont. But Montblanc has a history of shaking things up, as its German founders did in 1906 by producing a leak-proof fountain pen.

The penchant for disruption was also evident in 1997, when it entered the watch business.

Ten years later, it crossed a line many of its rivals had shied away from -- entering the field of smartwatches. Most Swiss luxury watch companies feared digital smartwatches would dilute their brands, and even some within Montblanc raised similar concerns. But Baretzki led the launch of the Summit smartwatch in 2017 despite internal pushback.

"The reaction was like, 'Are we legitimate as a luxury maison if we enter this segment? Would customers believe we're trading our brand quality?" Baretzki said of the doubts inside Montblanc.

But he argued the collaboration with Google was necessary, as tech companies that produce smartwatches have quickly caught up with Switzerland's prestige brands. Last year, 22.5 million Apple Watches were shipped worldwide, compared with 23.7 million Swiss watches, according to Strategy Analytics.

During his appearance at the Nikkei forum, Baretzki wore the upcoming third-generation Summit, which runs on Google Wear OS and a Qualcomm processor. From afar, the watch looks like a finely made Swiss timepiece, not a conspicuous wearable tech device.

"It's interesting how fast we found customers for this product," said Baretzki. He describes the wearable tech market as a pyramid that will always be capped by a luxury segment. "I can't imagine that there won't be a luxury segment for smart devices."

The Summit has proved to be an effective entry purchase for Montblanc customers. "We've seen a lot of new customers going into Montblanc because of this new tech segment. Many are not Montblanc customers primarily, but they entered the boutique because of these products then they are drawn to the universe of Montblanc," Baretzki said.

Many of these new customers are still coming from China, despite a weaker yuan, a slowing economy and the trade war with the U.S. "In Asia, there's a bit more appetite for luxury watches than in the Western world, where writing and leather may be more important," he said.

Gains from mainland China, where Swiss watch exports rose 14% this year, have made up for a 6% decline in Hong Kong. Hong Kong, embroiled in monthslong political turmoil, is the largest market for Swiss watches.

"Growth in the mainland China market is good enough to compensate," Baretzki said.

In Japan, Baretzki still sees room for growth despite an aging and shrinking population. "There's a strong affinity and understanding of the luxury world, much more than the rest of Asia," he said, due to Japan's longer exposure to Western luxury brands compared to emerging Asian economies.

"Whether the market expands or not, I believe we can grow market share," he added. "It's pretty easy if you come up with something different."

A recent leather goods collaboration with the Japanese streetwear brand BAPE sold out in 36 hours worldwide, and in only 30 minutes in Japan.

Montblanc chose a flagship store in Tokyo's Ginza district to introduce a new Ink Bar, where customers can have their fountain pens cleaned and test new inks and nibs. "The opening of the Ginza flagship just a year ago was the beginning of the revolution of Montblanc Japan," said Baretzki.

After introducing leather and watch products to the Japanese market, which knows the brand better for its writing instruments, Montblanc is expanding the new boutique design to other key stores worldwide.

Similar to his attitude toward digital products, Baretzki is not afraid of e-commerce. "You can have luxury with convenience," he said. Montblanc's parent, Richemont, also owns the online high fashion retailer Net-a-Porter.

"My duty is to ensure whatever way the customer wants to buy, they can buy," Baretzki added.

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